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Why US Financial Institutions need to Manage Risk “and role of Federal government to build confidence...
Why US Financial Institutions need to Manage Risk “and role of Federal government to build confidence in financial institutions
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Expert Solution
US Financial institutions need to manage risk because financial institution are exposed to these risks-
Credit risk- People who have taken loan, may default in repaying the loan, this is one of the major risks in financial institutions.
Market risk- Financial institutions are exposed to market risk, if there is slowdown in economy and due to inflation, interest rates are higher then there will be less demand of financial products.
Liquidity risk- Financial institutions have liquidity risk also, they may have shortage of funds.
Prevent from fraudulent practices- They have to prevent their customers from online banking, payment service. Customers may get safe and secure service.
Role of Federal government to build confidence in financial institutions- Federal Government always keeps the economy and financial system stable. It makes such policies that are for betterment of people and society. Federal Government stabilize the value of currency in terms of other currency. It makes sure the proper flow of currency in the country so that inflation and deflation may not be there. It keeps control on the banking and financial regulations.
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